Notes to Financial Statements

from City of Downey Annual Comprehensive Financial Report For Fiscal Year Ended June 30, 2022

by downeyca

INDEPENDENT AUDITORS’ REPORT

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2022

I. SIGNIFICANT ACCOUNTING POLICIES

Note 1: Organization and Summary of Significant Accounting Policies

a. Description of Entity

The basic financial statements of the City of Downey (the City) include the activities of the City of Downey Public Facilities Financing Corporation (the Corporation) the City of Downey Housing Authority (the Housing Authority) and the City of Downey Public Financing Authority (the Financing Authority).

The City of Downey was incorporated in 1956 under the General Laws of the State of California and became a charter City in 1964. The City operates under a Council-Manager form of government governed by a five-member council and provides the following services: public safety (police, fire, paramedic and ambulance), highways and streets, parks and recreation, public improvements, planning and zoning, and general administrative services.

The criteria used in determining the scope of the reporting entity are based on the provisions of the Governmental Accounting Standards Board (GASB). The City of Downey is the primary government unit. Component units are those entities which are financially accountable to the primary government, either because the City appoints a voting majority of the component unit’s board, or because the component unit will provide a financial benefit or impose a financial burden on the City. The City has accounted for the Corporation and Housing Authority as “blended” component units. Despite being legally separate, these entities are so intertwined with the City that they are, in substance, part of the City’s operations. Accordingly, these basic financial statements present the City and its component units, the City of Downey Public Facilities Financing Corporation, Housing Authority, and Public Financing Authority. Each blended component unit has a June 30 year end.

The City of Downey Public Facilities Financing Corporation, formerly known as City of Downey Civic Center Corporation, is a non-profit corporation organized June 1, 1981 for the purpose of assisting, through the issuance of revenue bonds, the financing necessary to construct public buildings and facilities for the City. The activities of the Corporation are reported in the proprietary fund financial statements as part of the golf enterprise fund. The Corporation prepares separate Basic Financial Statements and a copy can be obtained from the City’s Finance Department.

The City of Downey Housing Authority was established by the City Council on October 22, 1974 and is responsible for the administration of providing affordable housing in the City. The Housing Authority provides services entirely to the City and is governed by a five-member Board of Director which consists of members of the City Council. The City has operational responsibility over the Housing Authority. The Housing Authority’s financial transactions are reported in the Special Revenue Funds. The Housing Authority does not prepare separate Basic Financial Statements.

The City of Downey Public Financing Authority was created by the City of Downey Public Financing Authority under a Joint exercise of Powers Agreement to assist the Public Financing Authority in financing capital improvement projects, through the issuance of Lease Revenue Bonds. The Authority’s assets and liabilities are presented in the Measure S 2017 LRB fund and Measure M and R Bonds.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

b. Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government (including its blended component units) is reported separately from discretely presented component units for which the primary government is financially accountable. The City has no discretely presented component units.

Certain eliminations have been made as prescribed by the GASB in regard to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

Separate financial statements for the City’s governmental, proprietary, and fiduciary funds are presented after the government-wide financial statements. These statements display information about major funds individually and other funds in the aggregate for governmental and enterprise funds. Fiduciary statements, even though excluded from the government-wide financial statements, include financial information that represent the private purpose trust fund and custodial funds.

c. Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary and private purpose trust fund financial statements. Under the economic resources measurement focus, all assets, deferred outflows of resources, liabilities, and deferred inflows of

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

resources (whether current or noncurrent) associated with their activity are included on their Statements of Net Position. Operating statements present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations.

Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year in which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all the eligibility requirements have been satisfied. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the current financial resources measurement focus, only current assets and deferred outflows of resources and current liabilities and deferred inflows of resources are generally included on the balance sheets. The reported fund balance (net current assets) is considered to be a measure of “available spendable resources.” Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of “available spendable resources” during a period. Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. However, special reporting treatments are used to indicate that they should not be considered “available spendable resources” since they do not represent net current assets. Recognition of governmental fund type revenue represented by noncurrent receivables is reported as deferred inflows of resources.

Under the modified accrual basis of accounting, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 90 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, except for principal and interest on long-term liabilities, claims and judgments, and compensated absences which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of long-term liabilities are reported as other financing sources.

Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when the government receives cash.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

The City’s Fiduciary Funds consists of the private purpose trust fund which is reported using the economic resources measurement focus and the accrual basis for reporting its assets and liabilities.

d. Fund Classifications

The City reports the following major governmental funds:

The General Fund is the general operating fund of the City. All general tax receipts and fee revenue not allocated by law, Council policy or contractual agreement to other funds are accounted for in the General Fund. General Fund expenditures include operations traditionally associated with activities, which are not required to be accounted for or paid by another fund.

The Housing Authority Fund is used to account for revenues generated by housing assets received from former redevelopment agency and associated expenditures to be used for increasing or improving low- and moderate-income housing.

The CIP Grant Fund is used to account for revenues received for various street and infrastructure capital improvements.

The COVID-19 Grants Fund is used to account for special revenues from federal funding and payments from funding due to the coronavirus pandemic.

The City reports the following major proprietary funds:

The Water Fund is used to account for the provision of water services to residential, commercial and industrial customers.

The Golf Fund is used to account for all revenues and expenses related to the City - operated golf course, driving range and clubhouse.

The Sewer and Storm Drain Fund is used to account for charges collected for the upkeep of sanitary sewers and federally required drainage upkeep programs.

The City’s fund structure also includes the following fund types:

The Special Revenue Funds are used to account for proceeds of specific revenue sources that are legally restricted or otherwise restricted for specific purposes.

The Capital Projects Funds are used to account for financial resources used for the acquisition or construction of major capital facilities.

The Internal Service Funds are used to account for the financing of special activities that provide services within the City. These activities include compensation and other employee benefits, and equipment purchase and maintenance.

The Private-Purpose Trust Fund is used to account for the activities of the Successor Agency to the Community Development Commission of the City of Downey.

The Custodial Funds are used to account for money and property held by the City as trustee, agent, or custodian.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

The City’s fund structure also includes the following departmental classifications:

Operating expenditures of the City are classified by department. Departmental classifications are defined as follows:

General Government Department includes the legislative, city clerk, city attorney, city manager, personnel, finance, purchasing, and information technology divisions.

Public Safety Department includes police, fire and paramedic, and animal control operations.

Public Works Department includes maintenance and engineering divisions.

Community Services Department includes the recreation, theatre, social services, and the library divisions.

Community Development Department includes planning, redevelopment and building safety divisions.

e. Cash and Investments

The City pools idle cash from all funds for purposes of increasing income through investment activities. Investments are stated at fair value (quoted market price or best available estimate thereof). The City intends to either hold the investments until maturity or until market values equal or exceed cost. Interest income on investments is allocated among funds on the basis of average monthly cash and investment balances (see Note 4).

f. Accounts Receivable

The City extends credit to customers in the normal course of operations. The City accounts for potential losses in accounts receivable utilizing the allowance method. Management evaluates all accounts receivable and if it is determined that they are uncollectible they are written off as a bad debt expense.

g. Inventories

Inventories are valued at cost on a first-in first-out basis and are accounted for under the consumption method, whereby inventories are capitalized and recorded as expenditures as used. Water Enterprise Fund inventories consist primarily of water pipes, valves, and fittings. Inventories of fuel are recorded in the Equipment Internal Service Fund.

h. Capital Assets

Capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Donated assets and capital assets received in a service concession arrangement would be reported at acquisition value. Generally, capital asset purchases in excess of $5,000 are capitalized if they have an expected useful life of 1 year or more.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

Capital assets include additions to public domain (infrastructure), certain improvements including pavement, curb and gutter, sidewalks, traffic control devices, streetlights, sewers, bridges and right-of-way corridors within the City. The City has valued and recorded all infrastructure asset data as of June 30, 2014.

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the Government-wide Financial Statements and in the Fund Financial Statements of the Enterprise Funds. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective Statements of Net Position.

The lives used for depreciation purposes of each capital asset class are:

Buildings ......................................................................................................... 50 years Improvements other than buildings ................................................................ 20 years Water distribution lines ................................................................................... 50 years Water tanks, meters, hydrants, and other equipment ........................... 15 to 40 years Vehicles ................................................................................................... 3 to 15 years Machinery and equipment ....................................................................... 5 to 10 years Office furniture, computers and equipment .................................................... 10 years Infrastructure ......................................................................................... 20 to 50 years Right-to-use assets - vehicles ........................................ Shorter of the leased asset’s Useful life or the lease term

i. Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position and governmental balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has two items that qualify for reporting in this category, the deferred outflows relating to the deferred pension related items, and deferred OPEB related items, reported in the statements of net position. These outflows are the results of contributions made after the measurement period, which are recognized in the following year.

In addition to liabilities, the Statement of Net Position and Governmental Balance Sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. The City has three types of items in this category. One arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenues, is reported only in the governmental fund balance sheet. The governmental funds report unavailable revenues from two sources: taxes and long-term notes receivable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The second item is in relation to the net pension liability and net OPEB liability, reported in the statement of net position. Gains and losses related to changes in total pension liability, total OPEB liability and fiduciary net position are recognized in pension or OPEB expense systematically over time. Amounts are first recognized in pension or OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pension or OPEB and are to be recognized in future pension or OPEB expense. The third item relates to leases where the City is the lessor and relates to the future payments that will be recognized in future years.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

The recognition period differs depending on the source of the gain or loss:

Net difference between projected and actual earning on pension or OPEB plan investments

All other amounts 5 years

Expected average remaining service lifetime (EARSL) for the OPEB plan, Miscellaneous pension plan, and Safety pension plan are 7.68 Years, 2.1 Years, and 3.3 Years, respectively at June 30, 2021)

j. Net Position Flow Assumptions

Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied.

It is the City’s practice to consider restricted - net position to have been depleted before unrestricted - net position is applied.

k. Fund Balance

The fund balances reported on the fund statements consist of the following categories:

Nonspendable Fund Balance - This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.

Restricted Fund Balance - This classification includes amounts that can be spent only for specific purposes stipulated by constitution, external resource providers or through enabling legislation.

Committed Fund Balance - This classification includes amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision-making authority. The governing council is the highest level of decision-making authority for the government that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation.

Assigned Fund Balance - This classification includes amounts intended to be used by the government for specific purposes but do not meet the criteria to be classified as committed. The governing council (council) has authorized the finance director to assign fund balance. The council may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

Unassigned Fund Balance - This classification includes the residual balance for the government’s general fund and includes all spendable amounts not contained in other classifications. In other funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed or assigned.

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the City’s policy is to apply restricted fund balance first.

When an expenditure is incurred for purposes for which committed, assigned or unassigned fund balances are available, the City’s policy is to apply committed fund balance first, then assigned fund balance, and finally unassigned fund balance.

l. Compensated Absences

The City is obligated to pay all unused vacation to all employees. All vacation is accrued when incurred in the government-wide and proprietary fund financial statements. Governmental fund types recognize the vested vacation time as an expenditure in the current year to the extent it is paid during the year.

m. Claims and Judgments

Expenditures for claims and judgments are recognized when it is probable that the liability has been incurred at year-end and the amount of the loss can be reasonably estimated.

Claims payable, which will be liquidated from current resources, are recorded in the

General Fund and Internal Service Funds.

n. Pensions

For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. CalPERS audited financial statements are publicly available reports that can be obtained at CalPERS’ website under Forms and Publications.

GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: Valuation Date (VD): June 30, 2020 Measurement Date (MD): June 30, 2021 Measurement Period (MP): July 1, 2020 to June 30, 2021

o. Other Post-Employment Benefits (OPEB) Liability

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan), the assets of which are held by the California Employers’ Retiree Benefit Trust Program (CERBT), and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date (VD) Measurement Date (MD) Measurement Period (MP) June 30, 2021 June 30, 2021 July 1, 2020 to June 30, 2021

p. Statement of Cash Flows

A substantial portion of the City’s investments are in short-term, highly liquid instruments, with original maturities of three months or less (excluding fiscal agent investments). The

Enterprise and Internal Service Funds participate in the pooling of City-wide cash and investments. Amounts from the pool are available to these funds on demand. As a result, the cash and investments for the Enterprise and Internal Services Funds are considered to be cash and cash equivalents for the statement of cash flows purposes.

q. Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Specifically, the City has made certain estimates and assumptions relating to the collectability of its accounts and notes receivable, depreciation of capital assets, amounts due from other funds and amounts advanced to other funds, the valuation of property held for resale, and the ultimate outcome of claims and judgments. Actual results could differ from those estimates and assumptions.

r. Leases

Lessee - The City is a lessee for noncancellable leases of equipment. The City recognizes a lease liability and an intangible right to use lease asset (lease asset) in the financial statements. The City recognizes lease liabilities with an initial, individual value of $10,000 or more.

At the commencement of a lease, the City initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the right-to-use lease asset is amortized on a straight line basis over its useful life.

Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for leases.

The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise.

The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Right-to-use lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position.

Lessor - The City is a lessor for a noncancellable lease of a cell tower site. The City recognizes a lease receivable and a deferred inflow of resources in the financial statements.

At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts.

The City uses its estimated incremental borrowing rate as the discount rate for leases.

The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

s. New Accounting Pronouncement

For 2022, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases. GASB Statement No. 87 enhances the relevance and consistency of information of the government’s leasing activities. It establishes requirements for lease accounting based on the principle that leases are financings of the right to use an underlying asset. A lessee is required to recognize a lease liability and an intangible right to use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. These changes were incorporated in the City’s 2022 financial statements.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 2: Stewardship, Compliance and Accountability

Deficit Fund Balance

At June 30, 2022, the following funds had a deficit fund balance: CIP Grant Fund (4,290,949)$

Gas Tax COVID 19 Grants (807,084) (36,437)

Grants (112,308)

Measure S 2017 LRB (504,327)

Private Purpose Trust (48,032,096)

These funds will be replenished with future revenues.

Note 3: Property Taxes

Prior to the beginning of the fiscal year, Los Angeles County, which administers property tax collections for the City of Downey, establishes the assessed valuation roll on January 1 and property taxes attach as an enforceable lien on that date. After the fiscal year has started on July 1, taxes are levied prior to September 1 and are payable in two installments on November 1 (delinquent December 10) and February 1 (delinquent April 10). Assessed valuation is computed at 100% of full cash value; however, due to the 2% annual increase limit per Article XIII-A of the State Constitution, the roll does not fully reflect cash value. Property is reassessed to full cash value when it is sold or otherwise transferred. When property is sold after the normal January 1 lien date, a supplemental property tax is levied representing the difference between the tax levy based on the property value as of January 1 and the tax based on the new value.

Note 4: Cash and Investments

As of June 30, 2022, cash and investments were reported in the accompanying financial statements as follows:

GovernmentWide Statement of Net Position

Cash and investments

135,446,980$ Cash and investments with fiscal agents 24,487,146

Total Cash and Investments 159,934,126$ Fiduciary

Funds Statement of Net Position Total

8,056,559$

143,503,539$ 643,250 25,130,396

8,699,809$ 168,633,935$

Demand accounts Petty cash Investments

25,974,530$ 7,175 142,652,230 Total Cash and Investments 168,633,935 $

Investments Authorized by the California Government Code and the City’s Investment Policy

The table below identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s investment policy.

Authorized Investment Type Maximum Maturity Maximum Percentage Allowed

Maximum Investment in One Issuer

United States Treasury Bills, Bonds and Notes 5 years None None United States Government Sponsored

Agency Securities 5 years None None Small Business Administration Loans 5 years None None California Local Agency Obligations 5 years None None Certificates of Deposits (or Time Deposits) 5 years None None Negotiable Certificates of Deposits 5 years 30% None Medium-Term Corporate Notes 5 years 30% None Bankers' Acceptances 180 days 40% 30% Commercial Paper 270 days 25% 5% Repurchase Agreements 30 days None None Municipal Bonds 5 years None None Local Agency Investment Funds (LAIF) N/A None None Money Market Mutual Funds N/A None None

Investments Authorized by Debt Agreements

Investment of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City’s investment policy. Investments authorized for funds held by bond trustee include, United States Treasury Obligations, United States Government Sponsored Agency Securities, Certificates of Deposits, Commercial Paper, Local Agency Bonds, Bankers’ Acceptances, Money Market Mutual Funds, Investment Agreements and any other investments permitted by bond insurer. There were no limitations on the maximum amount that can be invested in one issuer, maximum percentage allowed or the maximum maturity of an investment, except for the maturity of Bankers’ Acceptance and Certificates of Deposits which are limited to one year and 270 days, respectively.

Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:

Investment Maturities (in Months) 12 months or less 13 - 36 Months 37 - 60 Months Total

Investments:

Local Agency Investment Fund

Federal Farm Credit Bank 72,379,087$ -$

$ 72,379,087 $ 7,710,020 1,846,940 9,556,960

Fedreal Home Loan Bank 7,694,024

7,694,024 Federal National Mortgage Assoc. - 2,769,210 2,769,210 Negotiable Certificates of Deposit 5,791,723 8,828,403 450,210 15,070,336 U.S. Treasury Notes 9,965,650 9,965,650 Money Market Mutual Funds 86,566 - - 86,566 Held by Bond Trustee

Money Market Mutual Funds 25,130,397 - 25,130,397 $ 103,387,773 $ 34,198,097 5,066,360$ $ 142,652,230

Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required, at the time of purchase, by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual rating, as reported by Standard and Poor’s, as of yearend for each investment type:

Investments:

United States Government Sponsored Agency Securities

FFCB

FHLB

FNMA

Negotiable Certificates of Deposit

U.S. Treasury Notes

Local Agency Investment Fund

Money Market Mutual Funds

Held by Bond Trustee

Money Market Mutual Funds Total as of June 30, 2022 Minimum Legal Rating AA+ A+ Unrated

9,556,960$

N/A 7,694,024 N/A 2,769,210 N/A 15,070,335 N/A 9,965,650 A 72,379,087 N/A 86,566 A

25,130,397 A

$ 142,652,230 9,556,960$ 7,694,024 2,769,210 -

$ 20,020,194 15,070,335 9,965,650 72,379,087 - 86,566

25,130,397 $ 122,632,036 $

Concentration of Credit Risk

The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

Investments in any one issuer that represent 5% or more of total City’s investments (excluding held by trustees) are as follows:

Issuer Federal Farm Credit

Bank Investment Type United States Government

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

At June 30, 2022, the City deposits (bank balances) were all insured by the Federal Deposit Insurance Corporation or collateralized.

Investment in State Investment Pool

The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

Note 5: Interfund Receivables/Payables and Transfers

As of June 30, 2022, amounts due from/to other funds were as follows:

Due from Other Funds Due to Other Funds General

Governmental Funds: CIP Grant Fund 5,796,349$ Other Nonmajor Governmental 1,967,864 Total 7,764,213$

The amounts loaned by the General Fund to the Other Governmental Funds were to provide short-term loans to fund operations of the various funds.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

Interfund transfers at June 30, 2022, consisted of the following:

Transfers out General

Nonmajor Governmental

Governmental Funds: General Covid 19

$ 3,290,102 $ 4,647,659 Other Nonmajor Governmental 2,900,243 1,000,000 Tranfers In Sewer and Storm Drain Water Internal Service Funds Total

-$ $ 136,500 $ 3,426,602$

627,699 5,275,358

1,630 - 3,901,873

Enterprise Fund: Water Golf Sewer and Storm Drain 962,998 494 16,519 575,000 - 1,537,998 - 494 16,519

Internal Service Fund: Equipment Total 11,201 8,539,114$ 4,290,102$ 576,630$ 627,699$ 11,201 136,500$ 14,170,045$

The General Fund transferred $3,290,102 to Other Governmental Funds and $136,500 to the Equipment fund to provide for capital expenditures, subsidize for various project operations, and to reimburse funds negative fund balance.

The Covid-19 Grants fund transferred $4,647,659 to provide for costs incurred by the general fund related to Covid-19 grant funding and $627,699 to cover Water Well Projects.

Other Governmental Funds transferred $2,900,243 to the General Fund, $1,000,000 to Other Governmental Funds, and $1,630 to the Sewer & Storm Drain Fund for various street and related program expenditures.

The Water fund transferred $962,998 to the General fund and $575,000 to the Sewer and Storm Drain fund, to fund administrative costs or certain program, administrative and overhead expenditures.

Transfer to the General fund from the Golf, Sewer and Equipment funds of $28,214 are to cover pension obligation bond payments.

Note 6: Advances Receivable from Successor Agency

As of June 30, 2022, amounts advanced to the Successor Agency were as follows:

Advances from General Fund Advances from Housing Authority Special Revenue Fund Advances from Employee Benefits 5,766,705$ 1,354,576 1,271,173 8,392,454$

The advances from the General Fund, Housing Authority Special Revenue Fund and Employee Benefits Internal Service Fund to the Successor Agency are to provide for operations of the Successor Agency. The collectability of the balance is subject to the approval of the Department of Finance. See Note 20 for additional information.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 7: Loans Receivable

The City has provided deferred-payment rehabilitation loans to qualifying low-income households in connection with the CDBG, Home Investment Partnership and Housing Authority housing rehabilitation programs. Loans receivable totaled $12,836,429 as of June 30, 2022.

Additionally, The City’s general fund entered into loan receivable agreements with two local auto dealerships. The City loaned $1,250,000, in April 2017, in order to assist the dealership to relocate to a larger location within the City. The loan is to be repaid over 12 years at a simple interest rate of 4.25%. In fiscal year 2019, the City entered into another operating covenant and loan receivable in agreement in the amount of $500,000. The outstanding balance on the general fund loans receivable as of June 30, 2022, is $1,108,967.

Note 8: Deferred Compensation Plan

The City has adopted a deferred compensation plan in accordance with Internal Revenue Code 457 for its eligible employees wherein they may execute an individual agreement with the City for amounts earned by them to be paid at a future date when certain circumstances are met. These circumstances are termination by reason of death, disability, resignation or retirement, or unforeseeable emergency.

The plan permits all city employees to defer a portion of their salaries until future years. Amounts accumulated under the plan have been invested by third party operators at the direction of the employee.

Pursuant to changes in August 1996 of IRC Section 457, the City formally established a trust in which it placed the 457 Plan assets and income. The assets, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights are held in trust for the exclusive benefit of all participants and their beneficiaries. These assets are not the property of the City, and as such are not subject to the claims of the City’s general creditors. As a result, these 457 plan assets are not reported in the City’s annual comprehensive financial report.

Note 9: Leases

a. Leases Receivable and Deferred Inflows of Resources

The City implemented GASB Statement No. 87 in the fiscal year ended June 30, 2022. The primary objective of this statement is to enhance the relevance and consistency of information about governments' leasing activities. This statement establishes a single model for lease accounting based on the principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. For additional information, refer to the following below.

The City leases land to various companies for installation of cellular towers. The term is an 8.75-year lease. The City also leases land to Discovery Park, Downey Landing and Industrial Realty Group with term ranging from 3.92 years to 38 years with an option to extend of 5 to 10 years. An initial lease receivable was recorded in the amount of $22,158,687. As of June 30, 2022, the value of the lease receivable is $21,336,971. The value of the deferred inflow of resources as of June 30, 2022 was $21,392,084, and the City recognized lease revenue of $766,602 during the fiscal year.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 9: Leases (Continued)

The principal and interest payments that are expected to maturity are as follows:

Governmental Activities

Fiscal Year Principal Payments Interest Payments

Total Payments 2023 373,237$ 339,292$ 712,529 $ 2024 387,928 333,703 721,631 2025 368,600 327,715 696,315 2026 376,262 321,686 697,948 2027 384,091 315,539 699,630 2028 - 2032 1,985,812 1,480,475 3,466,287 2033 - 2037 2,134,847 1,309,799 3,444,646 2038 - 2042 2,492,130 1,113,190 3,605,320 2043 - 2047 2,897,928 884,134 3,782,062 2048 - 2052 3,358,230 618,249 3,976,479 2053 - 2057 3,879,724 310,612 4,190,336 2058 - 2061 1,618,611 28,224 1,646,835 20,257,400 $ 7,382,618$ 27,640,018 $

Fiscal Year Principal Payments Business-Type Activities Interest Payments Total Payments

2023 2024 2025 2026 2027

138,874$ 140,403 141,948 143,510 145,089 2028 - 2032 369,747 11,126 $ $ 150,000 9,597 150,000 8,052 150,000 6,490 150,000 4,911 150,000 5,253 375,000

1,079,571$ 45,429$ 1,125,000$

b. Leases Payable and Right to Use Lease Assets

The City leases vehicles owned by Enterprise Fleet Management with terms range from 2.92 years to 5 years as of the contract commencement date. An initial lease liability was recorded in the amount of $1,960,113. As of June 30, 2022, the value of the lease liability is $1,550,366. The City is required to make annual fixed payments ranging from $142 to $923. The lease has an interest rate of 0.3150% to 2.1570%.

Right-to-use leased assets include the following at June 30, 2022:

Lease Type Major Class of Underlying Asset

Amount of Leased Capital Assets

Accumulated Amortization Vehicle Lease Right-to-Use Lease - Vehicles 1,960,112 $ 411,888$ Total 1,960,112 411,888

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 9: Leases (Continued)

Future principal and interest requirements to maturity for each lease liability are as follows:

Governmental Activities

Fiscal Year Principal Payments

Interest Payments

Total Payments 2023 $ 479,898 $ 9,693 $ 489,591 2024 481,604 6,845 488,449 2025 352,844 4,072 356,916 2026 161,491 1,954 163,445 2027 74,529 457 74,986 Total 1,550,366$ 23,021$ 1,573,387 $

Note 10: Capital Assets

A summary of changes in the Governmental Activities capital assets as of June 30, 2022, is as follows:

Balances at Transfers Balances at

June 30, 2021 of CIP Additions Deletions June 30, 2022

Governmental Activities:

Capital assets, not being depreciated:

Land and improvements 31,372,512$ -$ -$ (5,011,691)$ 26,360,821 $

Projects-in-progress 29,006,846 (30,000,743) 25,033,768 - 24,039,871

Total Capital Assets, Not Being Depreciated 60,379,358 (30,000,743) 25,033,768 (5,011,691) 50,400,692 Capital assets, being depreciated:

Buildings 76,855,760 8,926,008 - (401,000) 85,380,768

Land Improvements 27,434,109 2,252 - - 27,436,361

Equipment 26,031,345 - 676,496 (3,434,062) 23,273,779

Right-to-use leased asset - vehicle - - 1,960,112 - 1,960,112

Infrastructure 287,160,157 21,072,483 - - 308,232,640 Total Capital Assets, Being Depreciated 417,481,371 30,000,743 2,636,608 (3,835,062) 446,283,660 Less accumulated depreciation/amortization:

Buildings 25,429,853 - 1,841,530 (401,000) 26,870,383

Land Improvements 5,454,682 - 1,254,432 (29,035) 6,680,079

Equipment 12,921,155 - 1,240,754 (1,734,778) 12,427,131

Right-to-use leased asset - vehicle - - 411,888 - 411,888

Infrastructure 165,712,614 - 5,649,011 - 171,361,625 Total Accumulated Depreciation/amortization 209,518,304 - 10,397,615 (2,164,813) 217,751,106

Total Capital Assets, Being Depreciated, Net 207,963,067 30,000,743 (7,761,007) (1,670,249) 228,532,554

Governmental Activities

Capital Assets, Net 268,342,425$ $ 17,272,761 $ (6,681,940)$ 278,933,246$

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 10: Capital Assets (Continued)

Governmental Activities depreciation/amortization expense, excluding infrastructure, was charged to functions/programs of the primary government as follows:

General Government Public Safety Community Development Community Services Public Works Internal Service Funds

Total depreciation/amortization expense governmental activities 555,013$ 7,243,925 522,008 837,005 912,976 326,688 10,397,615$

A summary of changes in the Water and Golf Fund Business-type Activities capital assets at June 30, 2022, are as follows:

WATER FUND

Balances at Balances at June 30, 2021 Transfers Additions Deletions June 30, 2022

Business-type Activities:

Capital assets, not being depreciated:

Land 2,459,598$ -$ -$ -$ 2,459,598 $

Projects-in-progress 4,140,613 (2,895,455) 4,047,895 - 5,293,053

Water Rights 4,290,880 - - - 4,290,880 Total Capital Assets, Not Being Depreciated 10,891,091 (2,895,455) 4,047,895 - 12,043,531

Capital assets, being depreciated:

Buildings and improvements 398,073 - - - 398,073

Furniture and Equipment 2,325,537 - 127,432 (58,463) 2,394,506

Infrastructure 47,744,171 2,895,455 - - 50,639,626

Total Capital Assets, Being Depreciated 50,467,781 2,895,455 127,432 (58,463) 53,432,205

Less accumulated depreciation:

Buildings and improvements 262,043 - 7,270 - 269,313

Furniture and Equipment 1,720,320 - 101,446 (56,637) 1,765,129

Infrastructure 20,062,185 - 871,547 - 20,933,732

Total Accumulated Depreciation 22,044,548 - 980,263 (56,637) 22,968,174

Total Capital Assets, Being Depreciated, Net 28,423,233 2,895,455 (852,831) (1,826) 30,464,031

Water Fund

Capital Assets, Net $ 39,314,324 $ - $ 3,195,064 $ (1,826) $ 42,507,562

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 10: Capital Assets (Continued)

GOLF FUND Balances at Balances at June 30, 2021 Additions Deletions June 30, 2022

Capital assets, not being depreciated:

Land 8,294,387$ -$ -$ 8,294,387 $

Total Capital Assets, Not Being Depreciated 8,294,387 - - 8,294,387

Capital assets, being depreciated:

Land improvements 4,710,076 - - 4,710,076

Buildings and improvements 8,217,041 - - 8,217,041

Machinery and equipment 469,145 6,983 - 476,128

Total Capital Assets, Being Depreciated 13,396,262 6,983 - 13,403,245

Less accumulated depreciation:

Land improvements 4,393,600 25,085 - 4,418,685

Buildings and improvements 2,762,070 164,710 - 2,926,780

Machinery and equipment 393,295 75,939 - 469,234

Total Accumulated Depreciation 7,548,965 265,734 - 7,814,699

Total Capital Assets, Being Depreciated, Net 5,847,297 (258,751) - 5,588,546

Golf Fund Capital Assets, Net 14,141,684 $ $ (258,751) $ - $ 13,882,933

A summary of changes in the Sewer and Storm Drain Business-type Activities capital assets at June 30, 2022, are as follows:

SEWER AND STORM DRAIN FUND

Capital assets, not being depreciated:

Projects-in-progress Total Capital Assets, Not Being Depreciated Capital assets, being depreciated:

Machinery and equipment

Infrastructure Total Capital Assets, Being Depreciated Less accumulated depreciation:

Machinery and equipment

Infrastructure Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Sewer and Storm Drain Fund Capital Assets, Net

Balances at Balances at June 30, 2021 Transfers Additions Deletions June 30, 2022

2,282,995$ (140,050)$ 140,050$ $ 2,282,995

2,282,995 (140,050) 140,050 - 2,282,995

1,185,906 76,922,174 140,050 8,645 (108,966)

1,085,585 77,062,224

78,108,080

378,764 50,632,681

51,011,445

27,096,635

$ 29,379,630 140,050 8,645

67,305 1,546,307

1,613,612 (108,966) 78,147,809

(67,197)

378,872 52,178,988

(67,197) 52,557,860

140,050 (1,604,967) (41,769) 25,589,949

$ (1,464,917) $ (41,769)$ $ 27,872,944

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 10: Capital Assets (Continued)

Capital Project Commitments

The City has active construction projects as of June 30, 2022. At year end, the City’s projects-in-progress totaled $31,615,919. The following material construction commitments existed at June 30, 2022.

Project Name Contract Amount Expenditures to date as of June 30, 2022

Governmental Activities:

Residential Streets Pavement Rehabilitation -Area2 3,400,000$ 556,282 $

Total Construction Commitments

3,400,000$ 556,282$

Remaining Commitments

2,843,718$ 2,843,718$

Note 11: Long-Term Debt

Noted below is a summary of changes in long-term debt for the year ended June 30, 2022:

Governmental Activities:

Bonds payable

Bond premiums

Bond discount

Total Bonds

Direct borrowings

Financed purchases

Lease payable

Loans from Federal Government HUD Section 108 Loans

Total governmental activities long-term liabilities Business-type Activities:

Bonds payable

Loans payable

Golf Course 2014

Direct borrowings:

Financed purchases

Total business-type activities long-term liabilities

Balance Balance Due Within June 30, 2021 Additions Reductions June 30, 2022 One Year

164,361,263$ $

26,660,000 4,406,431 3,805,375 (92,417) $ 3,935,000

187,086,263$ 403,425 7,808,381 (7,108) (85,309) $

7,227,378 - - 168,675,277 30,465,375 4,331,317 194,809,335 7,227,378

4,662,044

- 1,979,496 2,682,548 - 1,960,112 409,746 1,550,366 541,748 479,898

3,931,000 - 353,000 3,578,000 353,000

177,268,321$

4,508,737$

3,265,000

73,084 $ 32,425,487 $ 7,073,559 202,620,249$

$ - $ 4,508,737 $

495,000 2,770,000

- 73,084 - $ 8,602,024

142,703$

515,000

7,846,821$ $ - $ 568,084 7,278,737$ $ 657,703

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 11: Long-Term Debt (Continued)

Governmental Activities

Bonds Payable

2005 Pension Obligation Bonds

In June 2005, the City issued $20,635,000 taxable pension obligation bonds. Bond proceeds were used to satisfy a portion of the City’s requirement to amortize the unfunded actuarial accrued liability with respect to retirement benefits accruing to members of the City. The par amount of the bonds comprised of $1,955,000 serial bonds and $18,680,000 term bonds. Principal on serial bonds mature in amounts from $90,000 to $395,000, the interest at 4.030% to 4.775% through June 1, 2015. Principal on the term bonds mature on June 1, 2021, 2025 and 2034, the interest rate at 4.885% to 5.083%. The term bonds are subject to optional redemption prior to their maturity at the option of the City, in whole or in part on any date, at the redemption price equal to the lesser of (a) 100% of the principal amount on the term bonds to be redeemed; or (b) the sum of the present value of the remaining scheduled payments of the principal and interest to be redeemed.

The future debt service requirements on these bonds are as follows:

Year Ending June 30, Principal Interest Total 2023 2024 2025 2026 2027 2028-2032 2033-2034 1,050,000$ 1,160,000 730,000 701,683$ 649,047 590,896

810,000 554,301

895,000

513,129 5,975,000 1,785,404 3,225,000 249,321 1,751,683$ 1,809,047 1,320,896 1,364,301 1,408,129 7,760,404 3,474,321

Total $ 13,845,000 $ 5,043,781 18,888,781$

The outstanding bonds contain a provision that if any event of default should occur, the sole legal remedy of any Holder or Beneficial Owner of the Bonds or the Participating Underwriter shall be an action to compel performance. No Bondholder or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Local Agency satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Local Agency shall have refused to comply therewith within a reasonable time.

2017 Lease Revenue Bonds

In December 2017, the City issued $45,415,000 lease revenue bonds. Bond proceeds will be used to finance the acquisition and construction of certain public capital improvements of benefit to the City and pay the cost of issuing the bonds. Principal on the bonds mature in amounts from $1,600,000 to $3,390,000, beginning December 1, 2018 through December 1, 2036, and the interest at 2.000% to 5.000% is due semiannually on June 1 and December 1, commencing on June 1, 2018.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 11: Long-Term Debt (Continued)

The future debt service requirements on these bonds are as follows:

Year Ending June 30, Principal 2023 2024 2025 2026 2027 2028-2032 2032-2037 1,815,000$ 1,905,000 2,000,000 2,100,000 2,205,000 12,795,000 15,940,000

Total 38,760,000$ Interest Total

1,637,163$ 1,544,163 1,446,538 1,344,038 3,452,163$ 3,449,163 3,446,538 3,444,038

1,236,413

3,441,413 4,369,563 17,164,563 1,275,919 17,215,919

12,853,796$ 51,613,796$

The outstanding bonds contain a provision that if any event of default should occur and continues to occur, the Authority is authorized under the terms of the Property Lease to exercise any and all remedies available under law or generated under the Property Lease. There is no remedy of acceleration of the total Base Rental payments due over the term of the Property Lease. The Trustee is not empowered to sell the Site and Facilities and use the proceeds of such sale to prepay the 2017 Bonds or pay debt service on the 2017 Bonds.

2021 Pension Obligation Bonds

In February 2021, the City issued $113,585,000 pension obligation bonds. Bond proceeds will be used to refinance the City’s statutory obligation to appropriate and make payments to CalPERS for certain amounts arising as a result of retirement benefits accruing to members of the System. Principal on the bonds mature in amounts from $3,595,000 to $7,325,000, beginning June 30, 2023 through June 30, 2044, and the interest at .317% to 2.995% is due semiannually on June 1 and December 1, commencing on June 1, 2022.

The future debt service requirements on these bonds are as follows:

Governmental Activity

Year Ending June 30, Principal Interest Total 2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 2043-2044 3,452,297$ 3,409,083 3,898,839 3,879,633 3,874,831 2,485,554$ 2,474,609 2,458,008 2,427,909 2,390,198 5,937,851$ 5,883,692 6,356,847 6,307,542 6,265,029 19,623,836 11,016,051 30,639,887 25,462,492 32,933,666 8,827,473 34,289,965 4,851,972 37,785,638

12,541,586 554,227 13,095,813

Total $ 109,076,263 $ 37,486,001 146,562,264$

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 11: Long-Term Debt (Continued)

Business Type Activity

Year Ending June 30, Principal Interest Total 2023 142,703$ 102,742$ 245,445 $ 2024 140,917 102,290 243,207 2025 161,161 101,603 262,764 2026 160,367 100,359 260,726 2027 160,169 98,800 258,969 2028-2032 811,164 455,356 1,266,520 2033-2037 1,052,508 364,889 1,417,397 2038-2042 1,361,334 200,559 1,561,893 2043-2044 518,414 22,909 541,323 Total 4,508,737$ 1,549,507$ 6,058,244 $

Year Ending June 30, Principal

Governmental Business 109,076,263$ 4,508,737

Total 113,585,000$

Interest 37,486,002$ 1,549,507

39,035,509$ Total 146,562,265$ 6,058,244

152,620,509$

The outstanding bonds contain a provision that if any event of default should occur and continues to occur, the City and Trustee have no liability to the Holders of Series 2021 bonds or any other party related to or arising from such rescission of redemption.

Sales Tax Revenue Bonds Measure M Series 2021A and Measure R Series 2021B

In October 2021, the City issued $15,275,000 Measure M Series 2021A bonds and $11,385,000 Measure R Series 2021 bonds. The bonds are being issued to finance the design, acquisition, and construction of certain local roadway and street improvement projects in the City, purchase a debt service reserve fund insurance policy to satisfy the reserve requirement for the 2021B Bonds and pay the costs incurred in connection with the issuance of the 2021B Bonds.

Principal on the Measure M Series A bonds mature in amounts from $470,000 to $1,790,000, beginning June 1, 2022 through June 1, 2041, and the interest at 2.25% to 4.0% is due semiannually on June 1 and December 1. Principal on the Measure R Series 2021B bonds mature in amounts from $460,000 to $815,000 beginning June 1, 2022 through June 1, 2039, and the interest at 2.125% to 4.0% is due semiannually on June 1 and December 1.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 11: Long-Term Debt (Continued)

The future debt service requirements on these bonds are as follows:

2021A Measure M Bond – Governmental Activity Year Ending June 30, Principal Interest Total

2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 470,000$ 485,000 505,000 530,000 545,000 3,090,000 3,765,000 5,220,000 555,556$ 536,756 517,356 497,156 475,956 2,032,981 1,363,581 552,900 1,025,556$ 1,021,756 1,022,356 1,027,156 1,020,956 5,122,981 5,128,581 5,772,900

Total 14,610,000$ 6,$ 532,242 21,142,242$

2021B Measure R Bond – Governmental Activity Year Ending June 30, Principal Interest Total

2023 2024 2025 2026 2027 2028-2032 2033-2037 2038-2042 460,000$ 480,000 500,000 515,000 540,000 3,030,000 3,655,000 1,615,000 375,231$ 356,831 337,631 317,631 297,031 1,144,356 517,756 56,713 835,231$ 836,831 837,631 832,631 837,031 4,174,356 4,172,756 1,671,713

Total 10,795,000$ 3,$ 403,180 14,198,180$

Finance Purchases

The future minimum lease obligations and the net present value of these minimum lease payments are as follows:

Year Ending June 30, Principal Interest Total

2023 2024 2025 2026 2027 2028 542,645$ 462,228 478,978 483,386 350,708 364,603 $ 96,272 $ 638,917 76,323 538,551

59,573 538,551

42,206 525,592

24,661 375,369

10,766 375,369

Total 2,682,548$ 309,801$ 2,$ 992,349

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 11: Long-Term Debt (Continued)

Loans from Federal Government

HUD Section 108 Loans

In 2011, the City received a Section 108 Loan from the United States Department of Housing and Urban Development. The payment schedule as of June 30, 2022, is as follows:

Year Ending June 30, Principal Interest Total 2023 2024 2025 2026 81,000$ 81,000 81,000 81,000 8,286$ 6,014 3,637 1,219 89,286$ 87,014 84,637 82,219

Total 324,000 $ $ 19,156 343,156$

In 2018, the City requested an advance in the amount of $1,000,130 pursuant to Section 108 of the Housing and Community Development Act of 1974. The City of Downey elected to deduct HUD’s $25,800 loan and $70 advance fees from the original $1,026,000 Section 108 Loan amount. The payment schedule as of June 30, 2022, is as follows:

Year Ending June 30, Principal Interest Total 2023 2024 2025 2026 2027 114,000$ 114,000 114,000 114,000 114,000 13,860$ 10,916 7,902 4,821 1,630 127,860$ 124,916 121,902 118,821 115,630

Total 570,000 $ $ 39,129 609,129$

In 2019, the City received a Section 108 Loan from the United States Department of Housing and Urban Development. The payment schedule as of June 30, 2022, is as follows:

Year Ending June 30, Principal Interest Total 2023 158,000$ 82,265$ 240,265$ 2024 158,000 78,185 236,185

2025 2026 2027 158,000 158,000 158,000 74,009 69,738 65,316 232,009 227,738 223,316

2028-2032 790,000 255,526 1,045,526

2033-2037 2038-2039 790,000 314,000 125,306 11,338 915,306 325,338

Total 2,684,000 $ $ 761,682 3,445,682$

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 11: Long-Term Debt (Continued)

Business-type Activities

2014 Golf Course Loan Agreement

The 2014 Loan Agreement, consisting of $6,350,000, were issued by the City of Downey to prepay the 2002 Lease Agreement and Certificates of Participation (Golf Course Financing). Principal payments are due August, the interest is due February and August of every year at a rate of 3.70% maturing in August 2026.

Future debt service requirements on these certificates are as follows:

Year Ending June 30, Principal Interest Total 2023 515,000$ 92,963$ 607,963 $ 2024 535,000 73,538 608,538 2025 550,000 53,465 603,465 2026 575,000 32,653 607,653 2027 595,000 11,008 606,008 Total 2,770,000$ 263,627$ 3,033,627 $

Note 12: Compensated Absences

Compensated Absences

For the fiscal year ended June 30, 2022, compensated absences are as follows:

Balance Balance Due Within June 30, 2021 Additions Reductions June 30, 2022 One Year

Compensated absences:

Governmental activities 16,574,417$ 5,521,970$ 5,489,479$ 16,606,908$ 5,489,479 $

Business-type activities 657,332 61,654 183,686 535,300 176,945

Total compensated absences 17,231,749 $ $ 5,583,624 $ 5,673,165 $ 17,142,208 $ 5,666,424

The compensated absences are predominantly associated with the General fund.

Note 13: Claims and Judgements

Claims Payable (Self-Insurance)

The City has two types of claims it has to manage and account for. The City is a member of Independent Cities Risk Management Authority (ICRMA), an Authority that provides liability insurance for several California Cities, and employs independent claims administrators to accomplish this task. The two types of claims are workers’ compensation and general liability. The self-insured retention and limits of insurance coverage (each occurrence or per employee, per year) for the respective claims are as follows:

Self-Insured Retention

Limit of Insurance Coverage Workers' Compensation 750,000$ 5,000,000 $ General Liability 2,000,000 20,000,000

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 13: Claims and Judgements (Continued)

Changes in the workers’ compensation, employee health benefits, and general liability outstanding claims liability for the fiscal year ended June 30, 2022, were as follows:

Claims Payable, June 30, 2021 Adjustments due to actuarial valuation Claims and Changes in Estimates Claims Payments Claims Payable, June 30, 2022 Claims payable, due within one year General Liability

Workers' Compensation

6,365,000$ 17,623,000$

(461,478)

4,199,287 (553,522) (2,781,287) 5,350,000 19,041,000

$ 1,132,000 3,372,000$

Employee Health Benefit Total 85,000$ 24,073,000$ (461,478) 4,199,287 (3,334,809) 85,000 24,476,000

-$ $ 4,504,000

The amounts payable include Incurred but Not Reported (IBNR) claims. Payments are typically paid from General Fund and Employee Benefits Internal Service Fund. The various amounts are based on information provided by the City’s claims administrators.

Note 14: City Employee Retirement Plan

a. General Information about the Pension Plans

The City of Downey contributes to the State of California Public Employees Retirement System (CalPERS), which is an agent multiple-employer public employee defined benefit pension plan. All qualified permanent and probationary employees are eligible to participate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions and all other requirements are established by state statute and city ordinance. Copies of PERS’ annual financial report may be obtained from their Executive Office - 400 P Street Sacramento, California 95814, or downloaded from the website at www.calpers.ca.gov.

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible for non-duty disability benefits after 10 statutorily reduced benefits.

Pension related balances presented on the Statement of Net Position as of June 30, 2022 by individual plan are described in the following table:

CalPERS Miscellaneous Plan CalPERS Safety Plan

Total

Deferred Employer Contributions $ 3,688,975 Deferred Outflows- Pension

Net Pension Liability $ (5,784,004) $

Deferred Inflows- Pension (17,704,330)$ 9,058,878 1,879,796 (10,312,742) (38,408,516) $ 12,747,853 1,879,796$ (16,096,746)$ (56,112,846)$

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 14: City Employee Retirement Plan (Continued)

The Plans’ provisions and benefits in effect at June 30, 2021, are summarized as follows:

Miscellaneous agent plans

Miscellaneous Classic Miscellaneous Classic - 2nd Tier

PEPRA Miscellaneous Safety Classic

Safety agent plans

Safety Classic - 2nd Tier PEPRA Safety Police PEPRA Safety Fire

Hire date

Prior to January 1, 2013 January 11,2012 January 1, 2013 January 1, 2013 and after

Prior to January 1, 2013 October 10,2012 January 1, 2013 January 1, 2013 and after

January 1, 2013 and after Benefit formula 2.7% @ 55 2.0% @ 60 2% @ 62 3% @ 50 3% @ 55 2.7% @ 57 2.7% @ 57 Benefit vesting schedule 5 years service 5 years service 5 years service 5 years service 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life monthly for life monthly for life monthly for life monthly for life Retirement age minimum 50 yrs minimum 50 yrs minimum 52 yrs minimum 50 yrs minimum 50 yrs minimum 52 yrs minimum 52 yrs

Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Required unfunded liability payment 2.0% - 2.7%, 50 yrs - 55+ yrs, respectively 2.0% - 2.7%, 50 yrs - 55+ yrs, respectively

8.000% 7.000% 1.0% - 2.5%, 52 yrs - 67+ yrs, respectively

6.250% 3.0%, 50 yrs - 55+ yrs

9.000% 3.0%, 50 yrs - 55+ yrs 2.0% - 2.7%, 50 yrs - 57+ yrs, respectively 2.0% - 2.7%, 50 yrs - 57+ yrs, respectively

9.000% 12.000% 12.000%

10.952% 10.952% 10.952% 20.432% 20.432% 20.432% 20.432%

$ 5,349,414 $ - $ - $ 10,820,375 $ - $ - $ -

The Miscellaneous and Safety Classic Plans are closed to new entrants.

Employees Covered

At the June 30, 2021 measurement date, the following employees were covered by the benefit terms for each Plan:

Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Miscellaneous Safety 463 323

559 91

241 177

1,263 591

Contribution Description

Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

b. Net Pension Liability

The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020, rolled forward to June 30, 2021, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 14: City Employee Retirement Plan (Continued)

Actuarial Assumptions

The total pension liabilities in the June 30, 2021, actuarial valuations were determined using the following actuarial assumptions:

Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68

Actuarial Assumptions Discount Rate 7.15%

Inflation

2.50% Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.00% Net of Pension Plan Investment and Administrative Expenses; includes Inflation

Mortality Rate Table (1) Derived using CalPERS’ Membership Data for all Funds

Post Retirement Benefit Increase Contract COLA up to 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.50% thereafter

(1)ThemortalitytableusedwasdevelopedbasedonCalPERS’specificdata.Formore details on this table, please refer to the 2017 experience study report.

Change of Assumptions -There were no changes in the discount rate.

Subsequent Events - There were no subsequent events that would materially affect the results presented in this disclosure.

Discount Rate -The discount rate used to measure the total pension liability was 7.15 percent. To determine whether the municipal bond rate should be used in the calculation of the discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. The tests revealed the assets would not run out. Therefore, the current 7.15 percent discount rate is appropriate, and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 7.15 percent is applied to all plans in the Public Employees’ Retirement Fund (PERF). The cash flows used in the testing were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS website under the GASB 68 section.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, staff took into account both short-term and long-term market return expectations as well as the expected pension fund (PERF) cash flows. Taking into account historical returns of all the Public Employees Retirement Funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 14: City Employee Retirement Plan (Continued)

Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each PERF fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the Board effective on July 1, 2014.

Asset Class Current Target Allocation

Real Return Years 1 - 10 (1)

Real Return Years 11+ (2)

Global Equity 50.00% 4.80% 5.98% Global Fixed Income 28.00 1.00 2.62 Inflation Sensitive 0.00 0.77 1.81 Private Equity 8.00 6.30 7.23 Real Estate 13.00 3.75 4.93 Liquidity 1.00 0.00 -0.92

(1) An expected inflation of 2.00% used for this period. (2) An expected inflation of 2.92% used for this period.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 14: City Employee Retirement Plan (Continued)

c. Changes in Net Pension Liability

The changes in the Net Pension Liability recognized over the measurement date for each Plan follows:

Increase (Decrease)

Miscellaneous Plans

Total Pension Liability (a) Plan Fiduciary Net Position (b)

Net Pension Liability/(Assets) (c)=(a)-(b) Balance at: 6/30/2020 (Valuation Date) (1) 210,321,943$ 145,546,316$ 64,775,627 $ Changes Recognized for the Measurement Period: Service Cost 2,872,012 - 2,872,012 Interest on the Total Pension Liability 14,690,041 - 14,690,041

Difference between Expected and Actual Experience Contribution from the Employer Contributions from Employees Net Investment Income Plan to Plan Resource Movement (521,832) -

(521,832) 39,587,168 (39,587,168) 1,233,750 (1,233,750) 35,352,353 (35,352,353)

- 3,965 (3,965)

Benefit Payments including Refunds of Employee Contributions Administration Expenses Net Changes During 2020-21 Balance at: 6/30/2021 (Measurement Date) (1) (11,561,991) (11,561,991)

- (145,392)

145,392 5,478,230 64,469,853 (58,991,623) 215,800,173$ 210,016,169$ 5,784,004$

Safety Plans

Balance at: 6/30/2020 (Valuation Date) (1) Changes Recognized for the Measurement Period: Service Cost Interest on the Total Pension Liability Difference between Expected and Actual Experience Contribution from the Employer Contributions from Employees Net Investment Income Plan to Plan Resource Movement Benefit Payments including Refunds of Employee Contributions Administration Expenses Net Changes During 2020-21 Balance at: 6/30/2021 (Measurement Date) (1)

Total Pension Liability (a) 441,988,439$ Increase (Decrease) Plan Fiduciary Net Position (b) 296,797,565$

Net Pension Liability/(Assets) (c)=(a)-(b) 145,190,874$

7,124,490 30,838,840 7,124,490 30,838,840

(3,092,936)

(3,092,936) 94,012,641 (94,012,641) 2,467,916 (2,467,916) 73,568,416 (73,568,416)

- (3,965) 3,965

(22,290,600) (22,290,600)

- (296,482)

296,482 12,579,794 147,457,926 (134,878,132) 454,568,233$ 444,255,491$ 10,312,742$

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 14: City Employee Retirement Plan (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage-point higher (8.15 percent) than the current rate:

Plan's Net Pension Liability

Plans

Discount Rate - 1% (6.15%) Miscellaneous 32,880,281 $ Safety 70,756,943 103,637,224$

Discount Rate (7.15%) 5,784,004$ 10,312,742 16,096,746$ Discount Rate + 1% (8.15%) (16,664,743)$ (39,345,553) (56,010,296)$

Recognition of Gains and Losses

Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense.

The amortization period differs depending on the source of the gain or loss:

Difference between projected and actual earnings 5 year straight-line amortization

All other amounts Straight-lineamortizationoverthe averageexpectedremainingservice livesofallmembersthatareprovided withbenefits(active,inactive,and retired)asofthebeginningofthe measurement period.

The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired).

The EARSL for the Plan for the measurement period ending June 30, 2021 is 3.3 years for safety and 2.1 years for Miscellaneous, which was obtained by dividing the total service years of 1,943 safety and 2,078 miscellaneous (the sum of remaining service lifetimes of the active employees) by 591 safety and 1,263 miscellaneous (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also note that total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 14: City Employee Retirement Plan (Continued)

Pension Plan Fiduciary Net Position

Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

d. Changes in Net Pension Liability

For the measurement period ending June 30, 2021, the City incurred pension expense in the amount of ($604,391) and $1,774,770 for the Miscellaneous and Safety Plans, respectively, totaling $1,170,379 for all plans. The City recognized a reduction of net pension liability of $133,599,807, $39,588,358 from the Miscellaneous Plan and $94,011,449 from the Safety Plan. At June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Miscellaneous Plans

Pension contributions subsequent to measurement date Differences between Expected and Actual Experiences Net difference between projected and actual earnings on pension plan investments

Deferred

Outflows of

Resources

3,688,795$ -

Deferred Inflows of Resources

-$ (277,287)

(17,427,043) 3,688,795$ (17,704,330)$

Safety Plans

Deferred Outflows of Resources

Deferred Inflows of Resources

Pension contributions subsequent to measurement date 9,058,878$ $ Differences between Expected and Actual Experiences 1,879,796 (2,155,683) Net difference between projected and actual earnings on pension plan investments - (36,252,833) 10,938,674 $ (38,408,516) $ Total Deferred Outflows and Inflows of resources 14,627,469$ (56,112,846) $

The $3,688,795 and $9,058,878 reported as deferred outflows of resources related to miscellaneous and safety plan contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2023. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:

Deferred Outflows/(Inflows) of Resources

Measurement Period

Ended June Miscellaneous Safety Total Plans

2022 (4,655,825)$ (8,639,840)$ (13,295,665) $ 2023 (4,072,641) (8,929,640) (13,002,281) 2024 (4,189,828) (9,017,094) (13,206,922) 2025 (4,786,036) (9,942,146) (14,728,182) (17,704,330) $ (36,528,720)$ (54,233,050) $

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 15: Post-Employment Benefits Other than Pensions

Plan Description

In connection with the retirement benefits for employees described in Note 13, the City provides post-retirement medical benefits to retirees. The Plan is an agent-multiple employer plan. These benefits are available to employees who retire with the City with at least 10 years of service or those who satisfy certain disability requirements. The Plan does not issue a publicly available financial report.

Funding Policy

The City’s funding policy affects the calculation of liabilities by impacting the discount rate that is used to develop the plan liability and expense. “Prefunding” is the term used when an agency consistently contributes an amount based on an actuarially determined contribution (ADC) each year. GASB 75 allows prefunded plans to use a discount rate that reflects the expected earnings on trust assets. Pay-as you go, or “PAYGO”, is the term used when an agency only contributes the required retiree benefits when due. When an agency finances retiree benefits on a pay as you go basis, GASB 75 requires the use of a discount rate equal to a 20 year high grade municipal bond rate.

The City has been and continues to prefund its OPEB liability, contributing 100% or more of the Actuarially Determined Contributions each year. Therefore, with the City’s approval, the discount rate used in this valuation is 6.15%, the City’s expectation of the long-term return on trust assets.

Employees Covered

As of the June 30, 2021 actuarial valuation, the following current and former employees were covered by the benefit terms under the OPEB Plan:

Active Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to, but not yet receiving benefits

424 238 662 1,324

Contributions

The OPEB Plan and its contribution requirements are established by Memoranda of Understanding with the applicable employee bargaining units and may be amended by agreements between the City and the bargaining units. The annual contribution is based on the actuarially determined contribution. For the measurement date ended June 30, 2020, the City’s cash contributions were $911,116 in total payments, which were recognized as a reduction to the OPEB liability.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 15: Post-Employment Benefits Other than Pensions (Continued)

Net OPEB Liability

The City’s net OPEB liability was measured as of June 30, 2021 using an actuarial valuation as of June 30, 2021. The Liability was determined based on the following actuarial methods and assumptions:

Actuarial Cost Method Actuarial Assumptions

Discount Rate

Inflation Entry Age Normal

6.15% 2.50% Salary Increases 3.0% per year Investment Rate of Return 6.80% Mortality Rate (1) MacLeod Watts Scale 2022 applied generationally from 2015 Healthcare Trend Rate Adjusted in future years ranging from 5.8% - 3.9%

Notes: (1) Mortality rates used were those published by CalPERS, adjusted to back out 15 years of Scale MP 2016 to central year 2015, then projected as described above.

The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class

Target Allocation

Long-term expected real rate of return

Global Equity 49.00% 6.80% Global Debt Securities 23.00% 4.50% Inflation Assets 5.00% 3.60% REITs 20.00% 6.20% Commodities 3.00% 3.50% Total 100.00%

Discount Rate

The discount rate used to measure the total OPEB liability was 6.15 percent. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 15: Post-Employment Benefits Other than Pensions (Continued)

Changes in the OPEB Liability

The changes in the net OPEB liability are as follows:

Balance at June 30, 2021 (measurement date 06/30/2020) Changes recognized over the measurement period:

Service Cost

Interest

Changes of assumptions

Contributions - employer*

Net investment income

Benefit Payments

Administrative expense

Investment Experience

Net Changes Balance at June 30, 2022 (measurement date 06/30/2021)

*Includes implied subsidy of $451,642

Increase(Decrease)

Total OPEB Liability/(Assets) 14,357,095$ Plan Fiduciary Net Position (b) 8,448,769$

383,096 985,640 1,185,773 -

911,116 2,322,102 (911,116) (288,995) (911,116) (3,196) -

1,354,398 2,318,906 15,711,493$ 10,767,675$

Net OPEB Liability/(Assets) (c) = (a) - (b) 5,908,326$

383,096 985,640 1,185,773 (911,116) (2,322,102) 3,196 (288,995)

(964,508) 4,943,818$

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

The following presents the net OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:

1% Decrease (5.15%)

Current Discount Rate (6.15%) 1% Increase (7.15%)

Net OPEB Liability 6,910,583 $ 4,943,818$ 3,308,859$

Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates

The following presents the net OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:

1% Decrease Current Healthcare Cost Trent Rates 1% Increase

(4.8% decreasing to 2.9%) (5.8% decreasing to 3.9%)

(6.8% decreasing to 4.9%) Net OPEB Liability 3,516,407$ 4,943,818$ 6,807,233 $

OPEB Plan Fiduciary Net Position

CalPERS issues a separate Annual Comprehensive Financial Report. Copies of the annual financial report may be obtained from the CalPERS Executive Office at 400 P Street, Sacramento, California, 95814.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 15: Post-Employment Benefits Other than Pensions (Continued)

OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB

For the fiscal year ended June 30, 2022, the City recognized OPEB expense of $322,950. As of fiscal year ended June 30, 2022, the City reported deferred outflows of resources related to OPEB from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

OPEB contributions subsequent to measurement date* 977,849$ $ Changes of assumptions 1,031,375 535,188 Differences between expected and actual experience - 919,327 Net difference between projected and actual earnings on OPEB plan investments - 1,195,752

Total 2,009,224 $ 2,650,267 $

* Includes implied subsidy of $451,642

The $977,849 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2021 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending June 30, 2023. Other amounts reported as deferred outflows of resources related to OPEB will be recognized as expense as follows:

Year ended June 30

Deferred Outflows/(Inflows) of Resources 2023 (428,596) $ 2024 (421,023) 2025 (439,522) 2026 (494,931) 2027 (30,990) Thereafter 196,170 (1,618,892)$

Note 16: Joint Ventures

The City is a participant in four joint ventures. The joint ventures are not considered part of the reporting entity, as the City does not exercise primary oversight responsibilities for their operations and does not have financial responsibility. These agencies do not depend on revenue from the City to continue in existence. Each participating agency in these joint ventures has proportionate control over management, budgets, and financial decisions.

Southeast Area Animal Control Authority.

This joint venture provides animal control services to nine cities in the Southeast Los Angeles County area. The Authority is governed by a nine-member board with one representative from each member city. Each member is obligated to contribute annually.

The Authority is not currently experiencing financial stress on accumulating significant resources. The City has no equity interest in the Authority and does not receive a share of operating results. Separate audited financial statements for the Authority may be obtained at 9777 Seaaca Street, Downey, California 90241.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 16: Joint Ventures (Continued)

Joint Fire Dispatching Center.

In this joint venture, the City operates as a cooperative program with the cities of Santa Fe Springs and Compton. The City receives all calls for fire emergency services and dispatches fire units for the four-city area. The program is financed with contributions from each city per a Joint Powers Agreement. Pro-rata expenditures and revenues are reported as part of the Fire Department. Separate audited financial statements are not prepared for the joint venture.

Gateway Authority (Gateway Region IRWM Joint Powers Authority).

This joint venture was formed through a directive of COG (Gateway Cities Council of Governments) in 2007 and was designated by the State of California as an Integrated Regional Water Management Group. This coalition is currently comprised of 19 cities and government entities and is responsible for the regional water planning needs in the Gateway Cities Region. The Gateway Authority is governed by the member cities and agencies and financed with contributions from each city per a Joint Powers Agreement. Separate audited financial statements for the Authority may be obtained at City of Signal Hill, City Hall. The City of Signal Hill acts as lead agency.

Southeast Water Coalition.

This joint venture was formed in 1991 to protect the quantity and quality of the regional water supply. This coalition is currently comprised of 11 cities. The Southeast Water Coalition is governed by the member cities and three advisory agencies. The City of Whittier acts as lead agency.

Note 17: Mortgage Revenue Bonds

On March 13, 1985, the City of Downey issued, in conjunction with the cities of Covina, Rancho Cucamonga, and Calexico, Residential Mortgage Revenue Bonds, 1985 Series A, to provide funds in the amount of $1,937,040 to purchase loans to be secured by single-family condominium units in the City. The bonds are special obligations of the Covina, Rancho Cucamonga, Calexico, Downey Housing Finance Agency. Seattle First National Bank serves as trustee.

On May 15, 1985, the City of Downey issued, in conjunction with the cities of El Monte and San Jacinto, Single-Family Residential Mortgage Revenue Bonds, Issue of 1985, to provide funds in the amount of $1,950,000 to purchase loans to be secured by single-family condominium units in the City. The bonds are special obligations of the El Monte-Downey-San Jacinto Housing Finance Agency. Seattle First National Bank serves as trustee.

On August 8, 2001, the City of Downey issued, in conjunction with the California Statewide Communities Development Authority, Multi-Family Housing Revenue Bonds, Series S and S-T, to provide funds in the amount of $3,300,000 to purchase loans to be secured by multifamily apartment complex in the City. The bonds are limited obligations of the California Statewide Communities Development Authority payable solely from the revenues from the multifamily apartment complex. U.S. Bank Trust National serves as trustee.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 17: Mortgage Revenue Bonds (Continued)

The above debt issues are special obligations of the respective Housing Finance Agencies and are payable solely from payments made on mortgage loans and are secured by a pledge of such mortgage loans. Neither the faith and credit nor the taxing power of the City of Downey have been pledged to the payment of the bonds. Accordingly, these debts are not reported as liabilities in the accompanying financial statements.

Note 18: Sales Tax Abatement

The City has entered into a tax abatement agreement with a local businesses. The abatement may be granted to any business located within or promising to relocate to the City. For the Fiscal Year ended June 30, 2022, the City abated taxes totaling $223,604. Under this program, the City has the following Tax abatement agreements:

A sales tax abatement to assist a local auto dealership in relocating to a larger facility within the City in order to retain jobs within the City and generate increased sales taxes.

Per the Agreement, the dealership is required to maintain no less than thirty- five full time equivalent positions. The City authorized a loan in the amount of $1,250,000, repayable over 12 years at an interest rate of 4.25 percent per year. Additionally, of any sales tax revenues exceeding $400,000 and up to $670,000, 50% of sales tax revenues shall be credited to the loan. For any sales tax revenue over $670,000, an additional 30% of the revenues shall be credited against the loan. Total tax abatements were $151,604 for the fiscal year.

A sales tax rebate with a local auto dealership in which the City authorized a loan in the amount of $500,000. The sales tax base will be 100% of the sales projections and the City will retain the first 50% of the sales tax collected. The second 50% will be shared will be shared by the City and the dealership. The City will use the portion to be credited against the $500,000 loan. Upon payment of the $500,000 loan, the City will then disburse the sales tax collected up to a maximum of $500,000. A combination of the sales tax credit for the loan of $500,000 plus the sales tax rebate will not exceed $1,000,000. Due to COVID 19 pandemic there was delay in construction and operation at the new dealership. City expects the dealership will be in operation during fiscal year 23-24, at which point abatement of sales tax will begin.

A tax abatement to assist a new RV dealership to serve as a sales tax rebate and job creation covenant. City will rebate 26% of the sales tax portion over $180,000 if the gross taxable sales at the property exceeds $18,000,000. The rebate is restricted to a maximum of $72,000 per year, and shall not exceed $504,000 over 7 year period. Tax rebated in fiscal year was $72,000.

Note 19: Other Disclosures

Expenditures in Excess of Appropriations

The following funds reported expenditures in excess of appropriations:

Other Governmental Funds - Other Special Revenue Funds: Street Lighting 61,759 $ CDBG 357,064 Gas Tax 489,620 ATV Public Access 9,282 Measure S 363,000

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 20: Fund Balance and Net Position

a. Net investment in capital assets

The breakdown for net investment in capital assets for the year ended June 30, 2022 is as follows:

Capital assets, net of accumulated depreciation

Less:

Bonds, notes and finance purchase agreements

Leases payable

Capital related, non-debt payable

Net investment in capital assets

Business-Type Activities Total Governmental Water Golf Sewer and Storm Business-Type

Activities Fund Fund Drain Fund Activities

278,933,246$ 42,507,562$ 13,882,933$ 27,872,944$ 84,263,439$

(45,588,256) (3,519,745) (2,770,000) (1,550,366) (700,823) (446,118)

231,093,801$ 38,541,699$ 11,112,933$ (988,992) -

26,883,952$ (7,278,737) (446,118)

76,538,584$

b. Restatements – Custodial Funds

Fiduciary activities were restated due to the following adjustments:

Beginning net position of the custodial funds on the Statement of Changes in Fiduciary Net Position has been restated by $211,771 due to donations received in FY2020-2021 not properly recorded.

Note 21: Successor Agency Trust for Assets of Former Redevelopment Agency

On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Downey that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. The City Council elected to become the Successor Agency for the former redevelopment agency. The assets and liabilities of the former redevelopment agency were transferred to the Successor Agency to the Community Development Commission of the City of Downey on February 1, 2012, as a result of the dissolution of the former redevelopment agency.

After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).

In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 21: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.

The City is acting in a fiduciary capacity for the assets and liabilities. Disclosures related to these transactions are as follows:

a. Cash and investments

Cash and investments reported in the accompanying financial statements consisted of the following:

Cash and investments pooled with the City Cash and investments with fiscal agent

b. Long-Term Debt

1,672,957$ 643,250 2,316,207$

The following long-term debts were transferred from the Redevelopment Agency to the Successor Agency on February 1, 2012, as a result of the dissolution. A description of long-term debt outstanding (excluding defeased debt) of the Successor Agency as of June 30, 202, follows:

Balance Balance Due Within June 30, 2021 Addition Deletion June 30, 2022 One Year

Bonds payable Advances from City Advances from County $ 4,120,000 8,942,185 $ 430,000 $

3,690,000$ 549,731 8,392,454 35,686,497 2,498,055 38,184,552

Total long-term liabilities 48,748,682 $ 2,498,055$ 979,731$ 50,267,006$ $ 450,000 -

450,000$

Bonds Payable

1997 Tax Allocation Bonds Payable

In 1997 the Community Development Commission issued $9,925,000 in Tax Allocation Bonds, partially to advance refund the existing 1990 Tax Allocation bond issue, which had a balance outstanding of $4,470,000, and to repay the City for advances of $3,970,508 plus interest. The bonds have an average interest rate of 5.1%. U.S. Bank serves as trustee for payment of principal and interest. The balance outstanding at June 30, 2022, is $3,690,000.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 21: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

The future debt service requirements on these bonds are as follows:

Year Ending June 30, Principal Interest Total 2023 2024 2025 2026 2027 2028 2029 450,000$ 475,000 500,000 525,000 550,000 580,000 610,000 Total 3,690,000 $ 177,581$ 153,878 128,894 102,628 75,081 46,125 15,631 699,818$ 627,581$ 628,878 628,894 627,628 625,081 626,125 625,631 4,389,818$

The outstanding bonds contain a provision that if any event of default should occur or continue to occur, the Trustee may, with the prior written consent of the Bond Insurer, and if request by the Bond Insurer and at the written direction of the Owners of a majority in aggregate principal amount of the Bonds at the time outstanding shall, (a) upon notice in writing to the Commission, declare the principal of all of the Bonds then outstanding, and the interest accrued thereon, to be due and payable immediately, of (b) enforce any rights of the Trustee under or with respect to the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture and applicable provisions of any law.

Pledged Revenue

The City pledged, as a security for bonds issued through the Community Development Commission, a portion of tax increment revenue that it receives. Assembly Bill 1X26 provided that upon dissolution of the Redevelopment Agencies (known as the Community Development Commission), property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. Total principal and interest remaining on the debt is $4,389,819 with annual debt service requirements indicated above. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of indebtedness incurred by the dissolved redevelopment agency was $1,636,325 and the debt obligation on the bonds was $630,131.

Advances from City

The DOF issued a Finding of Completion on May 15, 2013, in which DOF concurred that the Successor Agency has made full payments of any payments required as a result of the due diligence reviews. The Finding of Completion allows the placement of loan agreements between the former redevelopment agency and the City on the ROPS, as an enforceable obligation, provided the oversight board makes a finding that the loan was for legitimate redevelopment purposes. Loan repayments could begin in the 2015-16, fiscal year as governed by the criteria in the health and code safety section. When the repayments begin, 20% of the repayments of the loan agreement amounts are to be allocated to the Housing Successor Agency. As of June 30, 2022, the long-term advances totaled $8,392,454. As of June 30, 2022, $5,766,705 is reported in the General Fund, $1,271,173 is reported in Employee Benefit Internal Service Fund and $1,354,576 is reported in the Housing Authority Special Revenue Fund.

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 21: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

Advances from County

As part of the City’s redevelopment program, the City and County of Los Angeles have entered into a tax increment pass-through deferral agreement. This agreement specifies that the City will defer the payment of all current tax increment pass-through due to the County, until some future date, when certain conditions are met. Until that time, the County will charge 7% interest on the outstanding deferral amount. During the year, there were no pass-through agreement amounts owed to the County that were deferred. Interest of $2,498,055 was also accrued during the year on the outstanding deferral amount still owing. The amount owed the County, including accrued interest, at June 30, 2022, was $38,184,552.

Next Article

INDEPENDENT AUDITORS’ REPORT

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2022

I. SIGNIFICANT ACCOUNTING POLICIES

Note 1: Organization and Summary of Significant Accounting Policies

a. Description of Entity

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

b. Government-Wide and Fund Financial Statements

c. Measurement Focus, Basis of Accounting and Financial Statement Presentation

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

d. Fund Classifications

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

e. Cash and Investments

f. Accounts Receivable

g. Inventories

h. Capital Assets

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

i. Deferred Outflows/Inflows of Resources

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

j. Net Position Flow Assumptions

k. Fund Balance

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

l. Compensated Absences

m. Claims and Judgments

n. Pensions

o. Other Post-Employment Benefits (OPEB) Liability

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

p. Statement of Cash Flows

q. Use of Estimates

r. Leases

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 1: Organization and Summary of Significant Accounting Policies (Continued)

s. New Accounting Pronouncement

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 2: Stewardship, Compliance and Accountability

Note 3: Property Taxes

Note 4: Cash and Investments

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

Note 5: Interfund Receivables/Payables and Transfers

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 4: Cash and Investments (Continued)

Note 6: Advances Receivable from Successor Agency

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 7: Loans Receivable

Note 8: Deferred Compensation Plan

Note 9: Leases

a. Leases Receivable and Deferred Inflows of Resources

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 9: Leases (Continued)

b. Leases Payable and Right to Use Lease Assets

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 9: Leases (Continued)

Note 10: Capital Assets

Balances at Transfers Balances at

June 30, 2021 of CIP Additions Deletions June 30, 2022

Governmental Activities:

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 10: Capital Assets (Continued)

WATER FUND

Balances at Balances at June 30, 2021 Transfers Additions Deletions June 30, 2022

Business-type Activities:

NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2022

Note 10: Capital Assets (Continued)

GOLF FUND Balances at Balances at June 30, 2021 Additions Deletions June 30, 2022